Activists don’t shy from the largest companies, survey reveals

Shareholder activism continued to intensify during the spring 2015 proxy season. More companies were the targets of activist campaigns and were forced to engage with shareholders, according to a survey by Shearman & Sterling LLP.

And it’s not just smaller companies that are affected: To date, eight of the 100 largest U.S. public companies in terms of revenue and market capitalization were subject to the agitations of an activist, up from six in 2014, the law firm said.

There’s no question, said Shearman & Sterling mergers and acquisitions partner David Connolly: “No company is immune. No company should consider themselves off limits.”

In an interview, Connolly pointed to the activists that have gone after companies like Apple Inc., General Electric Co. and DuPont Co.

Additionally, the law firm found, there has been a “dramatic increase” in the number of U.S. companies that received proxy access proposals — in which investors seek to place their board nominees on a proxy — from 20 in 2014 to 112 in 2015. The survey found that 59 percent passed with an average vote of 54 percent. In addition, 37 companies “adopted or committed to adopt, a proxy access bylaw in 2015.”

Another hallmark is the ever-increasing emphasis on compensation. Shearman partner Doreen Lilienfeld, who specializes in executive pay, said, “There’s more thoughtful disclosure on a company’s performance and compensation,” including “the governance steps that reinforce the processes behind executive pay.”

Most public companies acknowledge that activism is inevitable. As a result, Connolly said, “boards are becoming more diligent. While there’s no noticeable increase in a willingness to acquiesce to activist suggestions, the themes that activists pursue — such as returning capital to shareholders and getting rid of non-core businesses — may be consistent with good governance.”